Tesla Analyst Says This Factor Will Drive Powerful-Enough 'Narrative Shift' To Draw In Long-Time Skeptics

Tesla would be a beneficiary of tech advancements and regulatory support in the form of Inflation Reduction Act (IRA) tax credits over the next decade, according to an analyst at Morgan Stanley.

Tesla’s cost of goods sold per unit will likely continue to fall with continual learnings, higher volume per SKU, greater efficiency in the supply chain and structural battery pack implementation, analyst Adam Jonas said in a note.

The analyst sees further significant opportunities to reduce battery costs. Tesla is likely to make more than 3.1 million electric vehicles in the U.S. by 2030, and a potential $10,000 IRA boost per unit could fetch over $30 billion to the company, the analyst estimates. 

This could provide a 50% potential upside to Morgan Stanley’s 2030 auto EBIT estimate of $65 billion, Jonas said, adding that there is also likely to be gross margin expansion.

See also: Tesla Has A 'Competitive Moat' In This Area — Ford, GM Now Have A Chance Of Breaking It, Thanks To Biden: Analyst

The $7,500 consumer tax credit may not be applicable due to the “entity of foreign concern” clause, the analyst said. However, if IRA is implemented without any change, Tesla could potentially benefit to the tune of $55 billion from production tax credits alone from 2023-2030, he added.

“We believe that investors don’t yet appreciate the sheer magnitude of this bill,” the analyst said.

When investors look into which companies can vertically integrate and which have the capital to deploy in re-architecting the supply chain at giga/tera-scale, they may find Tesla to be the “easier name to own," Jonas said.

As such, the analyst thinks, Tesla’s emergence as a U.S. “infrastructure player” can drive a “narrative shift” powerful enough to onboard long-time skeptics in the name.

Jonas has an "overweight" rating and $383 price target for Tesla shares.

Price Action: Tesla closed Thursday’s session down 4.06% at $288.59, according to Benzinga Pro data.